PETTY CASH

FUND
SOURCE: ( I N T E R M E D I AT E A C C O U N T I N G 1 A – 2 0 2 2 E D I T I O N ; Z E U S V E R N O N
MILLAN)
PETTY CASH FUND
Let us recall that, IMPREST SYSTEM requires all cash receipts to be deposited
intact and all cash disbursements to be made through checks. Nevertheless,
requiring cash disbursements for relatively small amount to be made thru
checks is inexpedient. Thus, the establishment of Petty Cash Fund is a must.

PETTY CASH FUND – is money set aside to defray relatively small amount of cash
disbursements. What constitutes a “small amount is matter of company policy”.
ACCOUNTING FOR PETTY CASH
FUND
A. Petty Cash Fund is established
◦ It is established in conformity with imprest system internal control over cash. The
check is typically drawn to the order of a petty cash custodian who is responsible for
the custody of petty cash fund.

Entry:
Petty Cash fund xx
Cash in bank xx
ACCOUNTING FOR PETTY CASH
FUND
B. Disbursement out of the petty cash fund
◦ disbursement out of petty cash fund, but no journal entry/ies will be made. Instead,
cash payments are initially recorded in a PETTY CASH REGISTER (e.g. log book) and
supported by signed PETTY CASH VOUCHERS.
Entry:
NO JOURNAL ENTRY
ACCOUNTING FOR PETTY CASH
FUND
C. Replenishment of petty cash disbursements
o PCF is replenish when its balance becomes low. The replenishment is made through
check and is supported by a check disbursement voucher (CDV).
o The petty cash custodian shall not retain the supporting documents for replenished
petty cash disbursements, but rather surrenders them to the accounting department.
This is to avoid presenting supporting documents for replenishment more than once.
o Journal Entry (no overage or shortage)
Various Expense accounts xx
Cash in Bank xx
#
ACCOUNTING FOR PETTY CASH
FUND
D. ADJUSTMENT FOR UNREPLENISHED FUND AT REPORTING DATE
o When preparing FSs, any un-replenished petty cash fund should be adjusted in order
not to overstate cash and not to understate expenses.

o Journal Entry
Various Expense accounts xx
Petty Cash Fund xx
#
ACCOUNTING FOR PETTY CASH
FUND
E. SUBSEQUENT FOR CHANGES IN LEDGER BALANCE OF PETTY CASH FUND
Subsequent changes, should a board resolution is made to change the ledger balance of the petty cash
fund, the entries are:

o (Increase Petty Cash Fund)

Petty Cash Fund xx
Cash in Bank xx
#
o (Decrease the petty cash fund)
Cash in Bank xx
Petty Cash fund xx
#

AGAIN, THE PCF BALANCE SHOULD RELATIVELY FIXED IN THE ABSENCE OF A BOARD
RESOLUTION AUTHORIZING A CHANGE IN ITS ORIGINAL BALANCE. THIS IS TO
PROMOTE BEST INTERNAL CONTROL OVER CASH DISBURSEMENT.
ACCOUNTING FOR PETTY CASH
FUND – shortage or overage @
Replenishment
Journal Entry (shortage)
Various Expense accounts xx
Shortage or overage xx
Cash in Bank xx
#
Journal Entry (Overage)
Various Expense accounts xx
Shortage or overage xx
Cash in Bank xx
#

Shortages/overages in the PCF are normally treated as receivable from/payable to the petty
cash custodian because the petty cash custodian is responsible for the PCF all the times.